The 25 reviewed websites were found to hold a lack of balance with information, with risks being minimalized at times. Some of these expressions thought to potentially generate a misleading or unrealistic optimism towards the investment.
In terms of loan-based crowdfunding similar issues were found. This included certain promotions pairing crowdfunding investing to savings accounts and banking, giving the impression that the lender’s capital was secure.
The review also found that many sites downplayed the important information about risks being diminished by claims that no capital had been lost.
Insufficient, omitted or cherry-picking of information was also found to be prominent therefore making the site potentially misleading with unrealistic optimistic impression of the investment.
In response to the findings, Gonçalo de Vasconcelos, Founder and CEO of crowdfunder SyndicateRoom stated: “SyndicateRoom welcomes this week’s action by the FCA to warn those equity crowdfunding platforms that are not being clear about risks, hiding information that enables customers to assess risk, etc to raise their standards of behaviour. SyndicateRoom is proud to be one of the leading platforms in this dynamic new sector and can confirm that it is NOT one of the offending platforms. It is crucial for investors and the reputation of the sector that those companies that have been misleading customers take immediate steps to improve their openness and honesty.
“Sadly these shortfalls in the behaviour and practices of just a few of the platforms can hurt the standing a reputation of the whole zone, which is both unfair and unhelpful to everyone concerned, including investors.”, he added.
The FCA expects to publish final guidance on social media and consumer communications in the first quarter of 2015.
The regulator is encouraging crowdfunding platforms to consider alternative comparison models that may be more suited to the particular characteristics of shares in businesses registered as co-operative or community benefit societies.
However, the regulator stresses that it is not suggesting that societies should avoid the use platforms to promote share offers, but when doing so they must comply with the requirements of the Co-Operative and Community Benefits Societies Act 2014.
Future EU work is set to have a slight sway on the shape of the UK crowdfunding market, as the FCA intends to hold fast to its regulatory approach on the crowdfunding market.
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